After weeks of pressure from the White House, the US Federal Reserve (Fed) finally shifted course on Wednesday, September 17, announcing a quarter-point cut to its benchmark interest rates. Rates now stand between 4% and 4.25%, the lowest level in three years. “Recent indicators suggest that growth of economic activity has moderated,” explained Jerome Powell, the institution’s chair, at a press conference following the announcement, also citing rising “downside risks to employment.” In plain language, political pressure was not a factor; the US central bank is simply concerned about the country’s economic health.
Powell had already mentioned in his August speech in Jackson Hole, Wyoming, that the institution’s focus had recently turned to challenges in the labor market. The latest reports, published in August and September by the Bureau of Labor Statistics (BLS), showed that the US economy had not been creating enough jobs in recent months and that the figures for 2024 had been overestimated.
Even more concerning is the rise of the unemployment rate in recent months, even as the number of people participating in the labor force has dropped sharply due to the administration’s strict anti-immigration policies. Other indicators, such as the troubled state of the real estate market – which is directly affected by borrowing rates – are also being taken into account.
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